The British public donated generously to honour the memory of and to carry on the charity work of Diana, Princess of Wales.

Franklin Mint's Memorial Collection sparked a costly court case

But eight years after her death, the Diana Memorial Fund faces criticisms that it has wasted millions of pounds of the charity's money.

"I think it's very unfortunate that a charity that has done so much to help so many people hasn't been able to run itself," says Diana's former private secretary, Patrick Jephson.

Central to the argument is a 12-inch People's Princess doll that had been created to continue the good works of the late Princess.

Instead, the doll sparked a protracted multi-million pound court battle in the US, which critics insist was allowed to throw hundreds of worthy causes into disarray.

"It makes me sad to think Diana's name has been associated with what most people see as a failure," says Mr Jephson.

Quick pound

When the newly established Diana Memorial Fund received the 'gift' from Diana's estate of the iconic celebrity princess's intellectual property rights, it should have been great news for charities around the world.

Whilst alive, Diana actively supported charities

During her lifetime, Diana's image had been a money-spinner for businesses and charities alike.

But after her death there was a problem: the Diana brand was already public property.

Her death had created a new boom in Diana merchandise and little of this money found its way to charitable causes.

"Whilst a large part of the nation was in grief, there was a certain commercial community who were thinking how they would turn a quick pound on the death of the Princess," says intellectual property rights lawyer Paul Walsh.

Suit and countersuit

Despite signing lucrative licensing deals with Flora margarine, beanie baby toy maker Ty and National Lottery scratch cards, the Fund refused American doll makers The Franklin Mint an official license for their Diana dolls and plates.

Mine clearing charities have been hit by a cash freeze

Then they went one step further and decided to sue.

This fateful decision would threaten to eclipse their main objective of distributing money to causes Diana would have supported.

In July 2003, after their initial case against the Franklin Mint and an appeal had been dismissed, the Fund found themselves facing a countersuit.

This saga overshadowed the Memorial Fund's reputation for imaginative and much-needed grant-giving work admired by many in the charity sector.

The Fund says legal restrictions prevent it from talking about the Franklin Mint case, though in a statement it says:

"It is very easy with 20/20 hindsight for people to say that launching the lawsuit was a mistake, but we did it on the best legal advice and for the best intentions."

"The memorial fund has brought a great deal of good to the world, a great deal that Diana herself would be pleased and proud to be associated with," agrees Stephen Lee, director, Centre for Voluntary Sector Management.

Appalling

It was this good work that would be damaged.

Acting on advice from their lawyers, the Fund froze grants already allocated to 127 charities.

In total, the Fund spent almost £4m to defend the Diana brand

And yet, the Mines Advisory Group, which specialises in the hazardous job of clearing explosives from war-torn countries, was one of the charities affected by the freeze.

"The Diana Memorial Fund was funding the clearance of landmines to provide assistance to people living under the most severe conditions," says Lou McGrath, chief executive, The Mines Advisory Group.

"To put that project under such risk having committed themselves to it just to pursue a case, I think lives have been lost, I think it's appalling."

The Fund appealed to other charities for help and a whip round eventually secured emergency cash for 127 projects. But by then, the civil war in Angola was over and the Mines Advisory Group's original plan had to change.

The changes would mean a new grant which the Fund could not process because of the freeze.

Unofficial merchandise

In November 2004, six years of legal wrangling came to a close when the Diana Memorial Fund agreed to pay £13.5m in an out-of-court settlement with the Franklin Mint.

The American company and the Fund agreed the money would be given to mutually acceptable good causes.

In total, the Fund spent almost £4m defending the Diana brand in the courts, yet it has failed to curb the global trade in unofficial Diana merchandise.

This spring, a new talking Diana doll is launched for a worldwide market.

In Windsor, just weeks after another Royal Wedding gave the Prince of Wales a new bride, sellers say that Diana souvenirs are still the best sellers.

Now critics of the Fund are calling for it to be wound up.

But the Fund itself is determined to carry on, with new licensing deals and more charity-giving work in the pipeline.

"For all its ups and downs, the Diana Princess of Wales Memorial Fund has become a tremendous force for good among neglected and stigmatised people," the Fund says in a statement.

The Fund also said that its commercial licensing operations have brought in £35m in new money for the charity after paying all the legal costs of the unsuccessful lawsuit against the Franklin Mint.

The Money Programme: Diana's lost millions was broadcast at 1900 on Friday 13 May on BBC2.